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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
/X/ Annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934 (Fee Required)
For the fiscal year ended December 31, 1995
OR
/ / Transition report pursuant to Section 15(d) of the Securities Exchange
Act of 1934 (No Fee Required)
For the transition period from ________________ to ________________
Commission file number 1-8993
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
SOURCE ONE MORTGAGE SERVICES CORPORATION
EMPLOYEE STOCK OWNERSHIP AND 401(K) SAVINGS PLAN
27555 FARMINGTON ROAD, FARMINGTON HILLS, MICHIGAN 48334-3357
810-488-7000
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
80 South Main Street
Hanover, New Hampshire 03755-2053
(603) 643-1567
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EXPLANATORY NOTE
This Annual Report on Form 11-K is being filed so that it may be
incorporated by reference into a Registration Statement on Form S-8 which Fund
American Enterprises Holdings, Inc. is filing with respect to shares of Common
Stock, $1.00 par value per share, of Fund American Enterprises Holdings, Inc.
issuable under the Plan.
INFORMATION FILED
The following financial statements and exhibit are filed with, and
included in, this Report:
A. Financial statements for the Plan consisting of:
1. Report of Independent Auditors
2. Statements of Assets Available for Benefits as of
December 31, 1995 and 1994
3. Statements of Changes in Assets Available for
Benefits for the years ended December 31, 1995 and
1994
4. Notes to Financial Statements
5. Schedule of Assets held for Investment Purposes
6. Schedule of Reportable Transactions
B. Exhibit:
23 Consent of Ernst & Young LLP
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SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Source One Mortgage Services Corporation
Employee Stock Ownership and 401(K)
Savings Plan
Date: September 27, 1996 By /s/ Greg Ghilardi
______________________________________
Greg Ghilardi
Vice President - Human Resources
Source One Mortgage Services
Corporation
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[ERNST & YOUNG LETTERHEAD]
Report of Independent Auditors
The Board of Directors
Source One Mortgage Services Corporation
We have audited the accompanying statements of assets available for benefits of
the Source One Mortgage Services Corporation Employee Stock Ownership Plan (the
"Plan") as of December 31, 1995 and 1994, and the related statements of changes
in assets available for benefits for the years then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets available for benefits of the Plan at
December 31, 1995 and 1994, and the changes in its assets available for
benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment purposes and reportable transactions as of and for the year
ended December 31, 1995, are presented for purposes of complying with the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974 and are not a required part
of the financial statements. The supplemental schedules have been subjected to
the auditing procedures applied in our audits of the financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
financial statements taken as a whole.
May 31, 1996
1
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Source One Mortgage Services Corporation
Employee Stock Ownership Plan
Statements of Assets Available for Benefits
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
--------------------
ASSETS
<S> <C> <C> <C>
Investments, at fair value (Note 4):
Fund American Enterprises Holdings, Inc. common stock
$5,022,492 $4,530,075
Collective funds 26,023 41,781
---------- ----------
Total investments 5,048,515 4,571,856
Company contribution receivable (Note 3) 998,175 1,084,110
Accrued income 131 211
--------- ----------
Total assets 6,046,821 5,656,177
LIABILITIES
Due to bank 2,762 -
---------- ----------
Net assets available for benefits $6,044,059 $5,656,177
---------- ----------
</TABLE>
See accompanying notes.
2
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Source One Mortgage Services Corporation
Employee Stock Ownership Plan
Statements of Changes in Assets Available for Benefits
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994
------------------------------------
<S> <C> <C>
Additions to assets attributed to:
Investment income:
Net realized and
unrealized appreciation
(depreciation) in fair
value of stock $ 105,549 $ (343,619)
Interest income 2,506 5,147
Stock dividend income--Fund
American Enterprises Holdings,
Inc. 13,969
------ -----------
122,024 (338,472)
Stock contributions from
Source One Mortgage
Services Corporation
(Note 3) 998,175 1,084,110
---------- ----------
Total additions 1,120,199 745,638
Deductions from net assets attributed to:
Benefits paid to participants
732,317 270,929
--------- --------
Net increase 387,882 474,709
Assets available for benefits at beginning of
year 5,656,177 5,181,468
Assets available for benefits at end of year
$6,044,056 $5,656,177
----------- -----------
</TABLE>
See accompanying notes.
3
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Source One Mortgage Services Corporation
Employee Stock Ownership Plan
Notes to Financial Statements
December 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
The Source One Mortgage Services Corporation Employee Stock Ownership Plan
("Plan") was established as a profit-sharing plan designed to invest primarily
in the stock of Fund American Enterprises Holdings, Inc. ("FAEH"). FAEH is a
publicly held company. Source One Mortgage Services Corporation (the "Company"
or "SOMSC") is an indirect wholly-owned subsidiary of FAEH.
Subsequent to December 31, 1995, SOMSC announced that effective October 1,
1996, the Plan will be merged into a newly formed 401(k) Savings Plan.
The fair values of the participation units owned by the Plan in the collective
funds were based on quoted market values on the last business day of the plan
year. The fair value of the investment in FAEH stock is based on the last
sales price on the last business day of the plan year. Realized gains and
losses are computed based upon a weighted average cost basis.
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates that affect the
reported amounts of assets and liabilities as of the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. DESCRIPTION OF THE PLAN
The Plan is a noncontributory defined contribution plan sponsored by the
Company. All administrative expenses associated with the Plan are paid by the
Company. Employees are eligible to participate in the Plan after completing
one year of service. A year of service for purposes of determining whether an
individual is eligible to participate in the Plan means the 12 consecutive
month period following the date the individual starts work upon completion of
l,000 hours of service. There are two entrance dates for the Plan each year,
January 1st and July 1st.
Each eligible participant has a FAEH stock account and a cash account. This
account is adjusted each year for (1) an allocation of the FAEH's common stock
contributed to the Plan, if any, and (2) any forfeitures of FAEH stock
resulting from the termination of employment of other participants in the Plan
before their accounts are fully vested and (3) interest and dividends. These
allocations are based on a percentage of participant compensation, as defined.
Participants are eligible for 100% of their account balance upon retirement
after attaining age 65, becoming disabled, or to the employee's beneficiary in
the case of death. Reduced percentages of their account balance are payable to
the participants at termination, in accordance with the following vesting
table:
4
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Source One Mortgage Services Corporation
Employee Stock Ownership Plan
Notes to Financial Statements (continued)
PERCENTAGE
YEARS OF SERVICE VESTING
Less than 3 0%
3 but less than 4 30
4 but less than 5 40
5 but less than 6 60
6 but less than 7 80
7 years or more 100
Upon termination for any reason, participants can elect to receive either the
cash proceeds from the sale of their stock by the trustee or the FAEH stock.
Payments and distributions are made in accordance with Plan provisions.
The Company reserves the right at any time to amend or terminate the Plan.
Upon termination of the Plan, participant accounts, after the payment of any
Plan termination expenses, would be valued as of the date of such termination
and would be 100% vested.
Additional information about the Plan agreement and benefit provisions is
contained in the pamphlet entitled "Employee Stock Ownership Plan - Summary
Plan Description".
3. CONTRIBUTIONS
The Company normally contributes to the Plan each calendar year an amount
determined at the discretion of the Company's Board of Directors, not exceeding
certain limits imposed by the Internal Revenue Code (IRC). For the Plan years
December 31, 1995 and 1994, the Board voted to contribute FAEH stock having a
value equal to $998,175 and $1,084,110, respectively (approximately 3% of the
sum of the individual participant's creditable compensation).
4. INVESTMENTS
The Plan's investments are held by a bank-administered trust fund. During 1995
and 1994, the Plan's investments (including investments bought, sold, as well
as held during the year) appreciated and depreciated, respectively, in fair
value, as determined by quoted market price, as follows:
5
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Source One Mortgage Services Corporation
Employee Stock Ownership Plan
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
NET
UNREALIZED
APPRECIATION FAIR
(DEPRECIATION) VALUE
IN FAIR VALUE AT END
DURING YEAR OF YEAR
-----------------------------------------
<S> <C> <C>
Year ended December 31, 1995:
Collective funds $ - $ 26,023
Common Stock 228,576 5,022,492
---------------------=------------------
$ 228,576 $5,048,515
Year ended December 31, 1994: ========================================
Collective funds $ - $ 41,781
Common stock (343,619) 4,530,075
----------------------------------------
$(343,619) $4,571,856
========================================
</TABLE>
The fair value of individual investments that represent 5% or more of the
Plan's net assets at either year-end are as follows:
<TABLE>
<CAPTION>
1995 1994
-----------------------------------------
<S> <C> <C>
Common Stock:
Fund American Enterprises Holdings,
Inc. $5,022,492 $4,530,075
</TABLE>
5. INCOME TAX STATUS
The Internal Revenue Service ruled on July 29, 1992 that the Plan qualifies
under section 401 (a) of the Internal Revenue Code of 1986 (the "Code"), and
therefore, the related trust is not subject to tax under present income tax law.
Once qualified, the Plan is required to operate in conformity with the Code and
ERISA to maintain its qualification. The administrator is not aware of any
course of action or series of events that have occurred that might adversely
affect the Plan's qualified status.
6
<PAGE> 10
Source One Mortgage Services Corporation
Employee Stock Ownership Plan
Schedule of Assets Held for Investment Purposes
December 31, 1995 and for the year then ended
<TABLE>
<CAPTION>
Description of Investment Including
Identity of Issue, Borrower, Maturity Date, Rate of Interest, Current
Lessor or Similar Party Collateral, Par or Maturity Date Cost Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fund American Enterprises Holdings, Inc. 67,416 shares of common stock $5,580,181 $5,022,492
Comerica 26,023 units of Short-Term 26,023 26,023
Investment Fund
------------------------------------
$5,606,204 $5,048,515
====================================
</TABLE>
There were no investment assets reportable as both acquired and disposed of
during the year.
7
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Source One Mortgage Services Corporation
Employee Stock Ownership Plan
Schedule of Reportable Transactions
Year ended December 31, 1995
<TABLE>
<CAPTION>
DESCRIPTION OF ASSET (INCLUDING
INTEREST RATE AND MATURITY IN
CASE OF A LOAN) PURCHASE SELLING LEASE RENTAL
IDENTITY OF PARTY INVOLVED PRICE PRICE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Category i) A transaction with
respect to any plan asset
involving an amount in excess
of 5% of the current value of
the Plan assets:
Comerica Bank 1,084,538 units of Short-Term
Investment Fund $1.00
1,089,476 units of Short-Term
Investment Fund $1.00
Fund American 13,500 shares of common stock 74.48
Enterprises Holdings,
Inc.
Category iii) A series of
transactions involving
securities of the same issue
which, when aggregated,
involve an amount in excess of
5% of the current value of
plan assets:
Comerica Bank Short-Term Investment Fund:
21 purchases
12 sales
Fund American
Enterprises Holdings, Common stock:
Inc. 2 purchases
12 sales
</TABLE>
<TABLE>
<CAPTION>
CURRENT
VALUE OF
EXPENSE COST ASSET OF NET
INCURRED OF TRANSACTION GAIN
TRANSACTION ASSET DATE (LOSS)
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Category i) A transaction with respect
to any plan asset involving an amount $1,084,538 $1,084,538
in excess of 5% of the current value of
the Plan assets:
Comerica Bank 1,089,476 1,089,476 $
Fund American 1,006,830 1,006,830
Enterprises Holdings,
Inc.
Category iii) A series of
transactions involving
securities of the same issue
which, when aggregated,
involve an amount in excess of
5% of the current value of
plan assets:
Comerica Bank
1,807,885 1,807,885
1,823,643 1,823,643 -
Fund American
Enterprises Holdings,
Inc. 1,089,476 1,089,476
825,635 702,608 (123,027)
</TABLE>
There were no transactions reportable under categories ii) or
iv).
8
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EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
(A) Financial statements for the Plan consisting of:
1. Report of Independent Auditors
2. Statement of Assets Available For Benefits as
of December 31, 1995 and 1994
3. Statement of Changes in Assets Available for
Benefits for the years ended December 31, 1995
and 1994
4. Notes to Financial Statements
5. Schedule of Assets Held for Investment Purposes
6. Schedule of Reportable Transactions
23 Consent of Ernst & Young LLP
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EXHIBIT 23
Consent of Independent Auditors
We consent to the use of our report dated May 31, 1996, with respect to the
financial statements and schedules of the Source One Mortgage Services
Corporation Employee Stock Ownership Plan included in this Annual Report
(Form 11-K) for the year ended December 31, 1995.
/s/ Ernst & Young LLP
Detroit, Michigan
September 26, 1996
